Publication Date

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Abstract

This presents the short run cost relations, using both the totals and the average/marinal approaches. After a brief introduction, the concepts of Total Cost, Total Fixed Cost, and Total Variable Cost are introduced, including both linear and nonlinear graphical examples. Next, the same is done with Average Total Cost, Average Fixed Cost, Average Variable Cost, and Marginal Cost. The link between production and cost is reviewed next, with emphasis on the point that the shape of the production function determines the shape of the cost function.

Recommended Citation

Run Time

8:10

Primary Discipline

Microeconomics

Skills Delivered

Ability to explain and graph various short run cost functions. Ability to distinguish between linear and nonlinear versions of cost functions. Ability to explain how the shape of the production function determines the shape of the cost function.